The European Central Bank President, Jean-Claude Trichet, was not as optimistic and as grounded as he has always been yesterday when he raised the alarm level on the debt crisis to red assuring the market that the crisis is nowhere close to be resolved!

Trichet said late yesterday in Frankfurt after the meeting of the European Systemic Risk Board, as he chairs the ESRB, that risk signals for financial stability in the euro area are rising and flashing red he said on a personal basis I would say yes, it is red.

He added saying that the biggest threat to financial stability is the link between debt problems and banks.

Trichet said yesterday the most serious threat to financial stability in the EU stems from the interplay between the vulnerabilities of public finances in certain EU member states and the banking system. He added saying that there are potential contagion effects across the union and beyond.

The warning comes in light of the EU Summit in Brussels that starts today, the ESRB is another warning body that was created to help avert a financial meltdown as that seen after Lehman Brothers collapsed in 2008.

The ESRB can be considered another watchdog as one of the four new bodies in Europe governing financial regulation and architecture. The others are t he European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.